Banking

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Paul Modra Executive Manager Member Value and Distribution Police Credit Union

BANKING Federal budget and its impact on the average Aussie

There’s been a lot of hype about the federal budget delivered by Treasurer Josh Frydenberg on May 11, 2021. It comes after a tough year for our economy because of the global pandemic and market uncertainty. But what does it all mean for the average Australian?

The federal budget included several important changes which are likely to impact on plenty of Australians – especially when it comes to their superannuation nest egg.

The proposed superannuation changes include a repeal of the current work test, a reduction in minimum age for downsizer contributions and changes to the self-managed superannuation funds residency rules.

Low- and middle-income earners are also set to benefit owing to proposed tax offset changes and plans to make childcare and first-property purchases more affordable. Low- and middle-income earners are also set to benefit owing to proposed tax offset changes and plans to make childcare and first-property purchases more affordable.

Personal income tax

The budget confirms the federal government’s plan to retain the low- and middle-income tax offset for the FY21-22 income year, which will provide further targeted tax relief for earners who fall into those wage brackets.

You don’t need to complete a section in your tax return to get these tax offsets. If you are entitled to any offset, it will be calculated and added when you lodge your return.

You will see the amount on your notice of assessment as the offset will be factored into your final refund estimate. Childcare and pre-schools

Starting on July 1, 2022, the federal government has announced $1.7 billion over five years (and $671.2 million per year ongoing) to increase childcare subsidies for families with more than one child aged five and under in childcare.

For a family with more than one child in childcare, the subsidy will increase by 30 per cent to a maximum subsidy of 95 per cent of fees paid for their second child and subsequent children. Removal of the $10,560 cap on the childcare subsidy will also occur.

Increase in support for first home buyers

Despite the low-interest-rate environment, first home buyers are still finding it tough to purchase their first property, especially with the recent spike in house pricing.

In a bid to help more young Australians buy their first homes sooner, as of July 1, 2022, the maximum amount of voluntary contributions which can be released under the First Home Super Saver Scheme (FHSS) will increase from $30,000 to $50,000.

The FHSS was introduced in the 2017-18 federal budget to reduce pressure on housing affordability, by allowing first home buyers to make voluntary contributions toward their superannuation fund.

This scheme allows first home buyers to save money faster inside their own super fund and then benefit from lower tax rates.

As of July 1, 2022, eligible individuals will be able to release up to $50,000 under the scheme to assist in the purchase of their first homes. Voluntary contributions made from July 1, 2017, can count toward the total amount released.

Superannuation – repealing the work test for voluntary superannuation contributions

Currently, anyone aged between 67 and 74 can make voluntary concessional and non-concessional contributions to their superannuation or receive contributions from their spouse if they work at least 40 hours over a 30-day period in the relevant financial year.

The budget proposes that those in this age bracket will be able to make or receive non-concessional contributions or salary-sacrifice superannuation contributions without having to meet the work test.

Removing the work test requirement will provide greater flexibility for the many older Australians who want to save for retirement through superannuation.

Older Australians will still need to meet the test if they want to make personal deductible contributions and will continue to be subject to existing contribution caps. The federal government expects to have required legislation passed to achieve a start date of July 1, 2022.